I mentioned this find to my audience and asked them how long they thought one billion barrels would last the world at the current rate of consumption. Guesses ranged from six months to three or four years. The correct answer was 12 days. Naturally, people were astonished and dismayed.

That is why I think it would prove useful for a warning label to come with each public announcement of a large oil or natural gas discovery. I understand that the companies that make these large finds are anxious to emphasize the size of the reservoir since this tends to goose the stock price. And, it is reserves that investors seem to react to, though, as it turns out, reserves are probably the least important factor in deciding whether a find is worth producing. (See my recent piece, "Reserves are bunk" for more on this.)

Now, I don't expect any government agency to issue a regulation requiring a warning label on oil and natural gas discoveries. But the next best thing would be for journalists reporting such finds to put them into perspective using a days of world consumption figure, or if the find is natural gas that will only be marketed domestically, days of domestic consumption. Journalists would also do well to explain that depletion rates for existing oil wells run between 6 and 9 percent and that this depletion must be overcome before any growth in supplies takes place. Providing this context would serve to alert policymakers and the public to the true significance (or insignificance) of each find.

Let's look at how some recent large finds might have appeared with the warning label I suggest:

Keep in mind that I am not quibbling with the recoverable resource estimates. Nevertheless, we should remember that things don't always work out as oil and natural gas production companies would like. Some will say I should include industry estimates of how much shale gas is likely to become available in North America over time. I say that we should wait and see if the industry projections actually work out. Caution should be our watchword when it comes to making public policy based on industry hype that is largely designed to make a company's stock price go up.

This kind of table, though not a perfect tool, would tend to temper the enthusiasm of the public and policymakers for a course that assumes that oil and natural gas will remain abundant for decades to come. If we want to create a robust society that will weather the inevitable energy transition away from fossil fuels, we might start by looking squarely at what recent large discoveries actually amount to. And, we should proceed, as I suggested in a recent piece, to make our society forecast-proof insofar as fossil fuels are concerned. In short, to paraphrase the current chief economist of the International Energy Agency, we should leave fossil fuels before they leave us.

If you take the most optimistic estimates for the oil finds only from the table and then add them up, you should get a little over 16 months of supply. But keep in mind my specifications for the warning label that the days of world consumption is based on the previous year's consumption. So, for the older finds, the days of world consumption would be a smaller number since overall world consumption has grown since then.

As for the natural gas finds, I used numbers as indicated by the double asterisks that reflect domestic U. S. consumption since I would expect virtually all this gas to be marketed within the United States. Using the most optimistic natural gas numbers yields about 20 months of domestic supply for both entries combined.

Naturally, there are many smaller discoveries of oil and natural gas. But what I haven't done and could be done is to add all of them up (assuming we could find the appropriate data) and and then subtract the number of days of supply we are losing to depletion over the period covered. That would give us a better idea if are running in place, making additions or falling behind.

Discoveries vs consumption for oil is a pretty clear case. If we backdate so-called reserve growth to when the field from which this growth comes was first discovered, we find that discoveries have been dramatically lagging consumption, about one barrel discovered for every three consumed in the last decade.

The correct answer was 12 days.Would you believe that this is exactly the same question and answer I used in peak oil lectures to civic groups here in Japan? And the response was... exactly the same. The general public has no idea.

Another thing to consider is that even after reserves are discovered and confirmed, there is a time lag in bringing the oil (or gas) to market.

Interestingly, there is much encouraging talk these days about how Iraq will change the equation. Indeed, Iraq has a great deal of oil that can be developed for relatively low capital cost. But there are many things that can go wrong in Iraq. Nevertheless, let's say that everything goes swimmingly and Iraq starts pumping vigorously, which depresses the price of crude. Is that a good thing? Recall that most oil-producing countries are in decline, which means their capital costs are rising. If Iraq pumps a lot of cheap crude, that would further discourage investment by other oil producers. Remember that after the crash of 2008, 60% of oil development projects in the Persian Gulf region were shelved because the drop in oil price removed the incentive. So I think counting on Iraq to supply us with lots of cheap crude is a mistake. What's your take on this, Kurt?

I, like you, am skeptical that Iraq will produce the huge flowrates that are now being touted in the media. But if it does, then I think the effect will be to hold down the price of oil and thereby discourage investment in new capacity elsewhere. We're experiencing that now because of the recession/depression which brought down prices and therefore discouraged investment.

It is precisely the boom/bust cycle which makes it difficult for exploration companies to commit to long-term exploration plans. Ultimately, that will mean lower flowrates than might have otherwise been the case because of lack of sustained exploration effort.